Public Policy Forum Blog

1st Quarter 2017 President's Message

As a diehard professional sports fan, April always is my favorite time of year, given that it marks the start of a new Major League Baseball season and the onset of the NBA and NHL playoffs. And, as one who makes his living analyzing government budgets, I often find April to be similarly invigorating.

The President has released his federal budget blueprint for the next fiscal year, launching deliberations by the House and Senate budget committees in Washington. In Madison, the Governor has released his proposed budget, initiating similar proceedings by the Legislature’s Joint Finance Committee.

Meanwhile, closer to home, the Milwaukee Public Schools Superintendent is getting ready to submit her budget to the School Board, and both Milwaukee County and the City of Milwaukee are initiating their budget processes by laying out the scope of next year’s challenges and setting criteria for departmental budget requests.

Unfortunately, as the Forum prepares to dig into next year's local budgets, our typical excitement is tinged with apprehension. Already, this is shaping up as one of the most difficult budget years in recent memory for each of our three largest public sector entities in Milwaukee. That’s partially related to what may come down the pike from Washington and Madison; but even more so, it’s the result of remarkably similar budget paradigms facing each of the three governments.

Let’s start with Washington, where cuts proposed by the Trump Administration (whether you agree or disagree with their rationale) could cause severe pain for each of the three. For example, the proposed elimination of funding in three areas – Community Development Block Grants, 21st Century Community Learning Centers, and New Starts and TIGER transit grants – could produce substantial  programmatic gaps that none of the governments can afford to fill with local funds. However, before panic sets in, it is important to remember that the President's plan is only a broad blueprint, and congressional budget and appropriations committees will have final say prior to the start of the fiscal year on October 1.

At the State level, the prognosis is not nearly as alarming. In fact, under the Governor’s proposal, it's possible that MPS could benefit from increased per-pupil aids and both the City and County would benefit from increased local transportation aids, while most other major revenue streams are held relatively flat. Again, caution is in order, however, as the budget still must make its way through the Legislature before final passage by July 1.

While it’s too early to tell for sure how our major local governments will be impacted by budget actions in Washington and Madison, it’s not too early to surmise that each will be facing sizable challenges as they prepare for their next budgets. And for all three, the problem stems, in part, from being victims of their own success.

As the Forum described in last year’s budget briefs, MPS, the City, and County were able to generate huge savings over the past several years from major health care restructuring. For several years, the unexpected size of those savings was a gift that kept on giving; the ability to project health care expenditure reductions in annual budgets freed up resources to meet other needs, while larger-than-expected mid-year savings were socked away in reserves for future budgets.

Unfortunately, those days are now over. That means large draws from reserves likely will not be possible in 2018 and each government may need to budget for health care increases.

Each of the three governments will face other challenges as well, including MPS’ reduction in federal Title I funds, the City’s likely need to come up with millions more for its employer pension contribution, and the County’s need to fill another hole in its transit budget. MPS' Superintendent already has warned of a $50 million budget hole for 2018, while the County's budget director has projected a gap of $37 to $55 million.

Our members and followers will be hearing a lot from the Forum in the coming months about local government budgets and the forces that are impacting them. In addition to our MPS Budget Brief – which will be released in late May –and our October briefs on the City and County budgets, we'll be releasing the next in our series of reports on local infrastructure (this one on sewer and water), a detailed report on the City's revenue structure, and two reports on local government service sharing this spring. We'll also use our blog to comment on federal and state budget impacts at the local level.

Former Treasury Secretary and OMB Director Jack Lew said that budgets are "not just a collection of numbers, but an expression of our values and aspirations." We'll be working hard in the coming months to frame our fiscal analyses with that sentiment in mind. As always, please feel free to call or e-mail with any feedback you may have.  

Rob Henken